The Proposal Goldman Sachs Didn’t Want Shareholders to See

Blankfein and Buffett photoThe Securities and Exchange Commission recently notified us that it will allow Goldman Sachs to exclude our shareholder proposal that asks for a report on the company’s lobbying priorities. The basis for the exclusion was that another shareholder, The Needmoor Fund, had already submitted a similar proposal. We disagree that the proposals duplicate each other. We hope that Needmoor will raise the issues that prompted our proposal, especially Goldman’s endorsement of Dodd-Frank, but we doubt they will.

Goldman has reportedly bowed to the American Federation of State, County and Municipal Employees (AFSCME) who filed a proposal to split the positions of Chairman and CEO, a role now filled by Lloyd Blankfein. Often dismissed as pests or gadflies, it is nice to see shareholder activists score once in while, but its clear that Goldman is more responsive to its left-wing critics.

Here is our proposal:

Goldman Sachs’ primary responsibility is to create shareholder value. The Company should pursue legal and ethical means to achieve that goal, including identifying and advocating legislative and regulatory public policies that would advance Company interests and shareholder value in a transparent and lawful manner.

Resolved: The shareholders request the Board of Directors, at reasonable cost and excluding confidential information, report to shareholders annually on the Company’s process for identifying and prioritizing legislative and regulatory public policy advocacy activities. The report should:

1. Describe the process by which the Company identifies, evaluates and prioritizes public policy issues of interest to the Company;

2. Identify and describe public policy issues of interest to the Company;

3. Prioritize the issues by importance to creating shareholder value; and

4. Explain the business rationale for prioritization.

Here is our supporting statement:

Goldman CEO Lloyd Blankfein was a high-profile proponent of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which institutionalizes the “too big to fail” doctrine. Sponsored by two of the most ethically-challenged members of Congress, Dodd-Frank might be more properly named the Wall Street Protection Act.

Goldman Sachs’ management might believe that the “too big to fail” doctrine is in the interests of the Company because it shifts business risks from shareholders to the public, but this reliance on government has become a flash point of anger for many taxpayers.

During the financial crisis when credit for ordinary people was drying up, Goldman was extended loans through several Federal Reserve lending facilities totaling tens of billions of dollars. According to a July 6, 2011 Bloomberg News story, a unit of Goldman Sachs borrowed $34.5 billion in 2008 under a then-secret Federal Reserve lending program known as single-tranche open-market operations. Goldman received the largest single loan under the program of $15 billion.

Goldman Sachs’ also benefitted from TARP, the ban on shorting its stock, and its overnight conversion to a commercial bank. These special privileges have created the impression that Goldman Sachs cannot compete in a marketplace, as further detailed in an August 17, 2011 article by NLPC Associate Fellow Fred N. Sauer titled “Why Goldman Sachs (and Warren Buffett) Always Win.” See:

Goldman Sachs is one of the most unpopular institutions in America today. There are reasons for it. Absent a system of reporting on how Goldman Sachs develops and prioritizes its lobbying priorities, shareholders will be unable to evaluate the potential for future miscalculation and damage to the Goldman Sachs brand name.